Study: Impact Measurement as a Key to Success in the Industry 4.0 Era

Impact measurement is currently a hot topic among the private sector. Some companies claim various benefits gained from conducting impact measurement. The next question is how much the value of companies—which have implemented impact measurement—is reflected in their financial reports.

One of the benchmarks for company value is its financial report. In research conducted by Ernst & Young, the trend in company value shows that the proportion of business value recorded as tangible assets on the balance sheet has drastically declined; from more than 80% in 1975 to around 50% in 2020, and less than 20% for major tech companies in the S&P 500. This fact drives organizational leaders to emphasize the importance of long-term programs and intangible assets as added value for companies.

On the other hand, the global commitment to achieving the Sustainable Development Goals (SDGs) by 2030 also pushes the private sector to take concrete steps in supporting SDGs through business operations, social initiatives, and environmental policies. This trend shift and these objectives highlight the importance of intangible assets such as intellectual property, human resources, SDG-related initiatives, and public trust as added value for companies—despite being difficult to measure using traditional reporting methods—as a crucial component of business value.

In an increasingly competitive business era, the presence of a sustainability narrative drives impact measurement—measuring the extent of the impact of project implementation on specific aspects—to become a key factor in strengthening innovation and sustainability. It not only serves as a management tool but also acts as a strategic compass in guiding companies toward sustainable and responsible success.

By understanding and communicating impact, companies not only build a better future for themselves but also for the society and environment around them.

In Indonesia, the government has emphasized that both state-owned enterprises (BUMN) and private companies must measure and report their impact through the Regulation of the Minister of BUMN No. PER-05/MBU/04/2021 Year 2021 on the Social and Environmental Responsibility Program of BUMN and Law No. 40 Year 2007 on Limited Liability Companies. This regulation outlines the government’s expectations for the implementation of BUMN programs, particularly related to measurable Social and Environmental Responsibility (TJSL).

Not only BUMN, but the private sector, in this case, Limited Liability Companies (PT) are also encouraged to report the implementation of their TJSL. Through this regulation, it is hoped that every company can measure the contributions and benefits generated through the programs they have initiated to bring change or added value to stakeholders and the company.

On the other hand, corporate social responsibility (CSR) also needs to start focusing on aspects of governance, social, and environmental preservation. These three aspects are crucial for companies to consistently implement in their operational policies. This includes involving employees through training on the importance of sustainability, engaging in initiatives related to the three aspects of sustainability, and transparency in reporting the environmental impact of company operations. By implementing these steps, companies not only fulfill their social responsibility and help preserve the environment but also enhance their company’s reputation in the eyes of consumers, investors, and the broader public. Moreover, the various benefits of impact measurement for fostering innovation and sustainability include:

1. Increasing company value

   Just as a compass not only shows direction but can also lead to treasure, the roadmap to treasure is an apt analogy for emphasizing the importance of impact measurement. By understanding the effects of every business decision on the environment and society, companies can open up opportunities for innovation, reduce risks, and increase efficiency. The result? A significant increase in company value. According to research by PwC, companies that effectively implement impact measurement experience a substantial increase in market value. This demonstrates that social responsibility aligns with economic growth.

2. Strengthening company image in society
   

   Amid rising public awareness of social and environmental issues, companies that transparently measure and report their impact will gain trust and loyalty from consumers. Deloitte (2020) found that 88% of consumers are more loyal to companies that support social and environmental issues they believe in. Thus, impact measurement is not only a tool for transparency but also a strategy for building a strong and positive reputation in the public eye.

3. Enhancing stakeholder engagement
   

   Impact measurement is a universal language that connects companies with all their stakeholders. With accurate and transparent data, companies can involve investors, communities, and employees in their journey toward sustainability. Deloitte (2023) notes that companies that effectively communicate their impact gain greater support and engagement from stakeholders, which in turn strengthens business performance.

4. Strengthening the impact roadmap for companies
   

   Impact measurement provides a clear direction for companies to achieve their sustainability goals. It is a navigational tool that helps set realistic targets and monitor their progress regularly. In this regard, impact measurement becomes essential because it provides the data needed to design and implement a clearer and more effective strategic roadmap. Ernst & Young (EY) states that companies with structured impact strategies are better able to identify risks and opportunities and adapt their business to market and regulatory changes. Thus, impact measurement becomes the foundation for companies to plan for a sustainable and resilient future.

5. Empowering employees to utilize company resources for good
   

   Employees are a company’s greatest asset, and empowering them to contribute to impactful programs can increase job satisfaction and productivity. According to a study by McKinsey (2015), companies that engage employees in social and environmental initiatives report a 20% increase in motivation and employee retention. On the other hand, EY also found that employees involved in positive impact initiatives show higher job satisfaction and greater contributions to the company’s goals.

So, how can impact measurement effectively strengthen innovation and sustainability?

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